0000858339-13-000052.txt : 20131029 0000858339-13-000052.hdr.sgml : 20131029 20131029160819 ACCESSION NUMBER: 0000858339-13-000052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20131029 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20131029 DATE AS OF CHANGE: 20131029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAESARS ENTERTAINMENT Corp CENTRAL INDEX KEY: 0000858339 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 621411755 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10410 FILM NUMBER: 131176476 BUSINESS ADDRESS: STREET 1: ONE CAESARS PALACE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7024076000 MAIL ADDRESS: STREET 1: ONE CAESARS PALACE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: HARRAHS ENTERTAINMENT INC DATE OF NAME CHANGE: 19950727 FORMER COMPANY: FORMER CONFORMED NAME: PROMUS COMPANIES INC DATE OF NAME CHANGE: 19920703 8-K 1 a2013q3earningsreleaseandp.htm 8-K 2013 Q3 Earnings Release and Prepared Remarks


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
October 29, 2013 (October 29, 2013)
Date of Report (Date of earliest event reported)
 
Caesars Entertainment Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-10410
 
62-1411755
(State of Incorporation)
 
(Commission File Number)
 
(IRS Employer
 
 
 
 
Identification Number)
 
 
One Caesars Palace Drive
 
 
 
 
Las Vegas, Nevada 89109
 
 
 
 
(Address of principal executive offices)
(Zip Code)
 
 
 
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 





 
 
Item 2.02
Results of Operations and Financial Condition.
Attached and incorporated herein by reference as Exhibit 99.1 and Exhibit 99.2, respectively, are copies of the press release and prepared remarks of the Registrant, each dated October 29, 2013, reporting the Registrant’s third-quarter 2013 financial results.
The information, including exhibits attached hereto, in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise expressly stated in such filing.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being filed herewith:
 
 
99.1
Text of press release, dated October 29, 2013.
 
99.2
Prepared remarks, dated October 29, 2013.





 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
CAESARS ENTERTAINMENT CORPORATION
 
 
 
 
Date: October 29, 2013
By:
 
/S/    MICHAEL D. COHEN        
 
 
 
Michael D. Cohen
 
 
 
Senior Vice President, Deputy General Counsel
and Corporate Secretary



 EX-99.1 2 a2013q3ex991earningsrelease.htm EXHIBIT 2013 Q3 Ex 99.1 Earnings Release


Exhibit 99.1


Contact:
 
Gary Thompson - Media
 
Jennifer Garrison - Investors
 
 
Caesars Entertainment Corporation
 
Caesars Entertainment Corporation
 
 
(702) 407-6529
 
(702) 407-6407
Caesars Entertainment Reports Financial Results for the Third Quarter 2013

LAS VEGAS, October 29, 2013 - Caesars Entertainment Corporation (NASDAQ: CZR) today reported the following third quarter 2013 results.

•
Continued positive underlying trends in third quarter Las Vegas hotel and F&B revenue as a result of resort fees and hospitality investments
•
Effective cost containment generated $65 million in cost savings in the third quarter 2013, compared to the third quarter 2012
•
Strengthened debt maturity profile through refinancing of CMBS and LINQ/Octavius debt
•
Raised approximately $200 million in cash via public equity offering; largest equity issuance since its IPO
•
Launched real-money online poker in Nevada on September 19th, leveraging World Series of Poker brand
•
Initial closing of Caesars Growth Partners (“CGP”) transaction occurred on October 21, 2013 and in connection Caesars sold certain assets to CGP in exchange for $360 million; expect closing of rights offering on November 18, 2013; November 2, 2013 is rights expiration date
•
Expects to close sale of Macau golf course in the fourth quarter 2013, for approximately $420 million in net cash proceeds

Summary Financial Data
The table below highlights certain GAAP and non-GAAP financial measures:
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
 
Percent
Favorable/
(Unfavorable)
(Dollars in millions, except per share data)
2013
 
2012
 
 
2013
 
2012
 
Net revenues (1)
$
2,180.0

 
$
2,195.8

 
(0.7
)%
 
$
6,481.3

 
$
6,565.6

 
(1.3
)%
(Loss)/income from operations (1) (2)
(637.5
)
 
(216.8
)
 
(194.0
)%
 
(370.4
)
 
33.6

 
*

Loss from continuing operations, net of income taxes (1)
(773.6
)
 
(502.6
)
 
(53.9
)%
 
(1,158.3
)
 
(952.3
)
 
(21.6
)%
Income/(loss) from discontinued operations, net of income taxes
11.8

 
(0.8
)
 
*

 
(29.5
)
 
(74.0
)
 
60.1
 %
Net loss attributable to Caesars 
(761.4
)
 
(505.5
)
 
(50.6
)%
 
(1,191.3
)
 
(1,027.8
)
 
(15.9
)%
Basic and diluted loss per share (3)
(6.03
)
 
(4.03
)
 
(49.6
)%
 
(9.47
)
 
(8.21
)
 
(15.3
)%
Property EBITDA (4)
510.0

 
512.2

 
(0.4
)%
 
1,490.1

 
1,587.0

 
(6.1
)%
Adjusted EBITDA (5)  
508.0

 
484.5

 
4.9
 %
 
1,448.2

 
1,517.6

 
(4.6
)%
____________________________
*     Not meaningful
(1) - (5) See footnotes following Caesars Entertainment Resort Properties results later in this release.

1


Management Commentary
“We made considerable progress on the execution of our strategy and achieved key milestones on many projects during the quarter, despite continued softness in the domestic gaming business,” said Gary Loveman, chairman, chief executive officer and president of Caesars Entertainment Corporation. “Building on our momentum, we further enhanced our hospitality assets in Las Vegas and are particularly pleased with the improvements we’ve seen in hotel and F&B performance.

“We advanced our expansion efforts with the continued development of Horseshoe Baltimore and the launch of real money online poker in Nevada. We also executed several transactions over the past several months that strengthened our balance sheet, including the refinancing of our CMBS debt, the initial closing of the Caesars Growth Partners transaction, the sale of approximately $200 million of common equity and the announcement of the sale of our Macau golf course for approximately $420 million, net of commissions. As a result of these transactions, we have greater liquidity and no significant maturities until 2018, providing a runway for new growth opportunities to generate returns for the recovery of the core business. 

“While we were disappointed with the circumstances in Massachusetts that led to us ultimately withdrawing from our partnership, we have turned our focus back to our ongoing development and repositioning efforts, which are greater catalysts for enhancing the Company’s performance. With a stronger capital structure and positive momentum in our core business - both on the development and operations side - I remain quite enthusiastic about our prospects heading into 2014,” Loveman concluded.
Consolidated Financial Results
Net Revenues
Net revenues remained relatively unchanged in the third quarter 2013 compared to the same quarter in the prior year mainly due to a decline in casino revenue of $112.2 million, or 7.1%, which was largely offset by the combination of lower promotional allowances and increases in non-gaming revenues, including pass-through management cost reimbursements.
Casino revenue declines were primarily driven by the continued impact of regional competition in Atlantic City and in certain other U.S. regional markets outside of Nevada, continued softness in the domestic gaming market and the loss of revenues resulting from the partial sale of our Conrad Punta del Este, Uruguay casino in the second quarter of 2013. Gaming results indicate continued weakening in slot volumes in virtually all domestic markets, while table volumes were relatively strong. On a consolidated basis, we experienced favorable hold in the third quarter 2013 compared to the prior year, driven by strong hold in Las Vegas, with unfavorable hold in other domestic markets.
On a consolidated basis, room revenue increased $6.4 million, or 2.1%, as a result of an increase in cash average daily room rates from $89 in the third quarter 2012 to $101 in the current quarter, primarily attributable to resort fees in Las Vegas and other Nevada properties. Total occupancy decreased 3 percentage points to 92% in the third quarter 2013 from 2012 due mainly to the disruption caused by construction activities related to the LINQ and renovation of The Quad Resort & Casino (the "Quad"), in Las Vegas.
Revenues for the Company's Managed properties increased $47.8 million for the third quarter 2013 when compared to the third quarter 2012 due to new managed properties, including Horseshoe Cincinnati (opened in March 2013) and Thistledown Racino in Ohio (commenced video lottery terminal operations in April 2013). A large portion of these revenues represent reimbursable management costs, which are presented on a gross basis as revenue and expense, thus resulting in no net impact on results. Reimbursable management costs were $72.7 million in the third quarter 2013 compared to $22.3 million in the prior year quarter.
Income from Operations
Loss from operations for the third quarter 2013 was $637.5 million compared to $216.8 million in the prior year quarter primarily due to higher non-cash intangible and tangible asset impairment charges which totaled $930.9 million in the third quarter 2013, as compared with $419.0 million in the third quarter 2012. Aside from the change in impairment charges, income from operations increased $91.2 million due primarily to a $48.6 million decrease in depreciation and amortization expense, a $32.3 million decrease in write-downs, reserves and project opening costs, net of recoveries and a $14.7 million decrease in corporate expense.

2


Net Loss and EBITDA measures
Net loss attributable to Caesars was $761.4 million in the third quarter 2013 compared to $505.5 million in the third quarter of 2012 due mainly to the decline in income from operations discussed above, and a $47.2 million increase in interest expense, net of interest capitalized interest, partially offset by an increase in income from discontinued operations, net of income taxes, of $12.6 million. These factors are further described in "Additional Financial Information" that follows later in this release.
Property EBITDA for the third quarter 2013 was relatively unchanged as the effects of cost reductions largely offset the income impact of lower revenues. Adjusted EBITDA increased $23.5 million, or 4.9%. Further details on these non-GAAP financial measures are found later in this release.
Regional Operational Results
To provide more meaningful information than would be possible on either a consolidated basis or an individual property basis, the Company's casino properties and other operations have been grouped into four regions. Operating results for each of the regions are provided below.
Las Vegas
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
 
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
773.5

 
$
735.1

 
5.2
%
 
$
2,271.0

 
$
2,287.3

 
(0.7
)%
Income from operations
146.9

 
62.4

 
135.4
%
 
377.0

 
310.4

 
21.5
 %
Property EBITDA (4)
222.4

  
163.9

 
35.7
%
 
631.0

  
589.6

 
7.0
 %

Las Vegas properties include Bally's Las Vegas, Bill's Gamblin' Hall & Saloon, Caesars Palace, Flamingo Las Vegas, Harrah's Las Vegas, Paris Las Vegas, Planet Hollywood Resort & Casino, The Quad Resort & Casino and Rio.
Net revenues in Las Vegas increased $38.4 million, or 5.2%, in the third quarter 2013 compared to the third quarter 2012, primarily driven by increases in casino, rooms, and food and beverage revenues. Ongoing construction activities associated with the LINQ project, the renovation of the Quad and the renovation-related closure of Bill's Gamblin' Hall & Saloon continued to negatively affect the revenues in the region. The Company estimates that these construction activities negatively impacted third quarter 2013 revenues in Las Vegas by approximately $2 million to $5 million and reduced income from operations and Property EBITDA by approximately $1 million to $3 million.
Casino revenues increased $11.2 million, or 2.9%, in the third quarter 2013 compared with the third quarter 2012 due to favorable hold and an increase in table games volume, both driven by baccarat play.
Room revenues increased $10.2 million, or 5.4%, in the third quarter 2013 compared with the prior year quarter. The increase was largely driven by the introduction of resort fees beginning in March 2013 which contributed to an increase in cash average daily room rates from $87 in 2012 to $101 in 2013. Partially offsetting this increase was a decline in the region's occupancy percentage of 3 percentage points from 95% in 2012 to 92% in 2013, primarily due to the disruption caused by construction activities related to the LINQ construction and renovation of the Quad and lower group business.
Food and beverage revenues increased $10.5 million, or 5.3%, in the third quarter 2013 compared with the prior year quarter due to the addition of several new restaurant offerings such as Bacchanal Buffet, which opened in September 2012, and Nobu at Caesars Palace and Gordon Ramsay-branded restaurants at Caesars Palace, Paris, and Planet Hollywood.
Property operating expenses in the region declined $20.2 million in the third quarter 2013 compared with the prior year quarter largely attributable to a significant improvement in bad debt expense. Depreciation expense in the region decreased $11.6 million, and write-downs, reserves, and project opening costs, net of recoveries also improved due to the receipt of a settlement related to a timeshare development agreement.
Higher net revenues combined with the overall reduction in property operating expenses resulted in Property EBITDA of $222.4 million in the third quarter 2013, an increase of $58.5 million, or 35.7%, compared with the prior year quarter.

3


Atlantic Coast
  
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
 
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
421.5

 
$
477.3

 
(11.7
)%
 
$
1,186.9

 
$
1,346.2

 
(11.8
)%
(Loss)/income from operations
(494.7
)
 
47.3

 
*

 
(496.0
)
 
82.4

 
*

Property EBITDA (4)
77.9

  
99.8

 
(22.0
)%
 
192.2

 
236.9

 
(18.9
)%
____________________________
*     Not meaningful

Atlantic Coast properties include Bally's Atlantic City, Caesars Atlantic City, Harrah's Atlantic City, Harrah's Philadelphia and Showboat Atlantic City. The Atlantic Coast also includes the results of CBAC Borrower, LLC, the entity which owns the Horseshoe Baltimore.

Net revenues decreased by $55.8 million, or 11.7%, as Atlantic City continues to be affected by the competitive environment in the region, which has caused a decline in visitation to the region's Atlantic City properties. The traffic decline, along with unfavorable hold, contributed to overall revenue declines, partially offset by lower promotional allowances. Loss from operations was $494.7 million in the third quarter 2013 compared to income from operations of $47.3 million in the prior year quarter, a change of $542.0 million, primarily due to non-cash tangible and intangible asset impairment charges of $536.2 million recorded in the third quarter 2013 with no comparable charge in the prior year quarter. Excluding the impairment charge, income from operations declined $5.8 million, or 12.3%. A decline in depreciation expense of $15.8 million in the third quarter 2013 when compared to the prior year quarter, largely offset the income impact of lower revenues.
Property EBITDA in the region declined $21.9 million, or 22.0%, in the third quarter 2013 compared with the prior year quarter as a result of the income impact of lower revenues.
Other U.S.
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
 
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
744.8

 
$
780.8

 
(4.6
)%
 
$
2,242.1

 
$
2,333.2

 
(3.9
)%
Loss from operations
(184.2
)
 
(178.9
)
 
(3.0
)%
 
(38.5
)
 
(116.5
)
 
67.0
 %
Property EBITDA (4)
162.3

 
200.7

 
(19.1
)%
 
522.9

 
564.9

 
(7.4
)%

Other U.S. properties include Grand Casino Biloxi, Harrah's Council Bluffs, Harrah's Joliet, Harrah's Lake Tahoe, Harrah's Laughlin, Harrah's Metropolis, Harrah's New Orleans, Harrah's North Kansas City, Harrah's Reno, Harrah's Tunica, Harveys Lake Tahoe, Horseshoe Bossier City, Horseshoe Council Bluffs, Horseshoe Hammond, Horseshoe Southern Indiana, Horseshoe Tunica, Louisiana Downs and Tunica Roadhouse Hotel and Casino.
Net revenues decreased by $36.0 million, or 4.6%, primarily attributable to lower visitation to the region's properties, driven by competition in the regional markets, and slightly unfavorable hold, as well as the apparent continued softness in the domestic gaming markets. Loss from operations for the third quarter 2013 was $184.2 million compared to $178.9 million in the prior year quarter. This change of $5.3 million was primarily due to higher non-cash impairment charges which totaled $296.7 million in the third quarter of 2013, compared to $292.0 million in the prior year quarter. Aside from the change in impairment charges, income from operations remained relatively unchanged. Operating expenses declined as a result of a $13.2 million decrease in depreciation expense and a $24.5 million improvement in write-downs, reserves and project opening costs, net of recoveries as compared to the prior year quarter. Property EBITDA declined $38.4 million, or 19.1%, in the third quarter 2013 compared with the prior year quarter primarily due to the income impact of declines in net revenues.

4


Managed, International, Other
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
 
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
Managed
$
84.8

 
$
37.0

 
129.2
 %
 
$
241.8

 
$
62.0

 
290.0
 %
International
63.9

 
103.1

 
(38.0
)%
 
280.5

 
333.7

 
(15.9
)%
Other
91.4

 
62.5

 
46.3
 %
 
258.9

 
203.2

 
27.4
 %
Total net revenues
$
240.1

 
$
202.6

 
18.5
 %
 
$
781.2

 
$
598.9

 
30.4
 %
Income/(loss) from operations
 
 
 
 
 
 
 
 
 
 
 
Managed
$
3.1

 
$
(2.1
)
 
*

 
$
15.4

 
$
3.0

 
*

International
0.7

 
(0.2
)
 
*

 
23.2

 
26.8

 
(13.4
)%
Other
(109.3
)
 
(145.3
)
 
24.8
 %
 
(251.5
)
 
(272.5
)
 
7.7
 %
Total loss from operations
$
(105.5
)
 
$
(147.6
)
 
28.5
 %
 
$
(212.9
)
 
$
(242.7
)
 
12.3
 %
___________________________
*     Not meaningful

Managed
Managed properties include companies that operate three Indian-owned casinos, as well as Horseshoe Cleveland, Horseshoe Cincinnati and Caesars Windsor, and the results of Thistledown Racetrack in Ohio ("Thistledown Racino") through August 2012 when the racetrack was contributed to Rock Ohio Caesars, LLC, a joint venture in which Caesars holds a 20% ownership interest.
Revenues for the Company's Managed properties increased $47.8 million, or 129.2%, in the third quarter 2013 compared with the prior year quarter, primarily due to new managed properties, including Horseshoe Cincinnati (opened in March 2013), and Thistledown Racino (commenced video lottery terminal operations in April 2013). A large portion of these revenues represent reimbursable management costs of $72.7 million, which are presented on a gross basis as revenue and expense, thus resulting in no net income from operations.
International
International properties include the results of Caesars' international operations. On May 31, 2013, the Company sold 45% of its equity interest in Conrad Punta del Este in Uruguay to Enjoy S.A. and, as a result of this transaction, no longer consolidates this International property's results, but instead accounts for it as an equity method investment. The above table includes the consolidated results of Conrad Punta del Este through May 31, 2013 and the equity method income or loss from operations beginning June 1, 2013.
In the fourth quarter 2012, the Company began discussions with interested parties with respect to a sale of the subsidiaries that hold the Company's land concession in Macau. As a result, the related assets and liabilities have been classified as held for sale at September 30, 2013 and December 31, 2012 and their operating results have been classified as discontinued operations for all periods presented and are excluded from the table above. On August 6, 2013, the Company, along with certain of its wholly-owned subsidiaries, entered into a share purchase agreement with Pearl Dynasty Investments Limited (“Pearl Dynasty”), pursuant to which Pearl Dynasty will purchase from the Company all of the equity interests of the subsidiaries that hold the Macau land concession. The sale is expected to close in the fourth quarter of 2013.
On March 4, 2013, the Company closed the Alea Leeds casino in England and its operating results have been classified as discontinued operations for all periods presented and are excluded from the table above.
Net revenue declines of $39.2 million, or 38.0%, were primarily driven by the second quarter sale of the equity interests in Conrad Punta del Este, resulting in a $26.5 million decline in net revenues, coupled with declines at the Company's London Clubs properties as a result of strong competition in the United Kingdom ("U.K.") market.
Other
Other is comprised of corporate expenses, including administrative, marketing, and development costs, income from certain non-consolidated affiliates, and the results of Caesars Interactive Entertainment, Inc. ("CIE"), which consists of the businesses related to the World Series of Poker® brand, an online real-money business in the U.K. and Nevada and an alliance with online gaming providers in Italy, and the results of the Company's social and mobile games businesses.

5


Net revenues increased $28.9 million, or 46.3%, during the third quarter 2013, compared to the prior year quarter primarily driven by the Company's social and mobile games business with CIE, mostly related to the late 2012 acquisition of substantially all of the assets of Buffalo Studios, LLC. Loss from operations improved $36.0 million, or 24.8%, compared to the prior year quarter, resulting primarily from $124.0 million of non-cash intangible asset impairment charges recorded in the third quarter 2012, compared to $92.5 million in the current quarter.
Additional Financial Information
Interest Expense, Net of Interest Capitalized
Interest expense, net of interest capitalized, increased by $47.2 million, or 9.2%, in the third quarter of 2013, due primarily to higher interest rates as a result of the extension of the maturities of Caesars Entertainment Operating Company, Inc. (“CEOC”) debt combined with higher debt balances, compared to the year-ago quarter, partially offset by higher mark-to-market gains on derivatives in 2013.
Gain on Early Extinguishments of Debt
During the third quarter of 2013, the Company recognized $13.0 million in gains on early extinguishments of debt, net of unamortized deferred finance charges and discount. The gains were primarily related to the purchase of $49.8 million of aggregate face value CMBS Loans for $36.0 million, resulting in a gain of $13.4 million, net of discount and deferred finance charges, partially offset by open market repurchases of $18.3 million face value of outstanding debt of CEOC for $18.3 million, resulting in a loss of $0.2 million, net of discount.
Benefit for Income Taxes
The effective tax rate for the third quarter of 2013 and 2012 was 34.8% and 31.0%, respectively. The increase in the effective tax rate is primarily due to the tax effects of larger non deductible goodwill impairments in 2012.
Income/loss from Discontinued Operations, Net of Income Taxes
Income from discontinued operations, net of income taxes was $11.8 million for the third quarter 2013 compared to a loss from discontinued operations, net of income taxes of $0.8 million in the third quarter 2012. This change was primarily due to a $15.2 million increase in the fair value of assets held for sale less cost to sell, recorded in the third quarter of 2013, related to the Company's land concession in Macau.
Liquidity
The Company had $1.8 billion in liquidity as of September 30, 2013, comprised of $1.7 billion of cash and $215.5 million of revolver capacity, partially offset by $100.5 million of revolver capacity committed to letters of credit.  The $1.8 billion in liquidity does not include $527.0 million of restricted cash. 
The total face value of debt outstanding was $23,847.1 million as of September 30, 2013.
Cost-Savings Initiatives
The Company has undertaken comprehensive cost-reduction efforts to rightsize expenses with business levels. The Company estimates that its cost-savings programs produced $65.1 million in incremental cost savings for the third quarter of 2013 compared with the same period in 2012. Additionally, as of September 30, 2013, the Company expects that these and additional new cost-savings programs will produce additional annual cost-savings of $126.2 million, based on the full implementation of current projects that are in process. As the Company realizes savings or identifies new cost-reduction activities, this amount will change.
Recent Developments
Closing of Caesars Growth Partners Transactions
As previously announced on October 21, 2013, Caesars distributed to its stockholders subscription rights to purchase common stock of Caesars Acquisition Company (“CAC”) in connection with a rights offering.
On that date, CAC, Caesars Growth Partners, LLC (“Growth Partners”) and Caesars and its subsidiaries consummated the transaction. Affiliates of Apollo Global Management, LLC and TPG Global, LLC exercised their basic subscription rights in full to purchase $457.8 million worth of CAC’s common stock and CAC used such proceeds to acquire all of the voting units of Growth Partners. Growth Partners used $360.0 million of the proceeds received from CAC to purchase Planet Hollywood, Caesars' joint venture interests in the Horseshoe Baltimore and a 50% interest in the management fee revenues for both of those properties, and

6


a subsidiary of Growth Partners assumed the $513.2 million face value outstanding secured term loan related to Planet Hollywood. CAC and Growth Partners also entered into agreements whereby CEOC will provide certain services and back-office support and business advisory services.
In addition, Caesars contributed all of its shares of CIE's outstanding common stock and approximately $1.1 billion face value of senior notes previously issued by CEOC in exchange for non-voting units of Growth Partners.
Caesars, through its subsidiaries, owns approximately 79% of the current outstanding economic interests of Growth Partners.Upon the closing of the rights offering in November 2013, Growth Partners will issue additional voting units to CAC depending upon the participation in the rights offering, and Caesars economic interest in Growth Partners will decrease.
Massachusetts Gaming License
 
The Company holds a minority ownership, and has a management agreement related to operating a casino, with Sterling Suffolk Racecourse, LLC (“Sterling Suffolk”), owner of Suffolk Downs racecourse in East Boston, Massachusetts. Sterling Suffolk recently made a bid for a casino license at its facility. On October 18, 2013, the Company received a report issued to the Massachusetts Gaming Commission from the Director of the Investigations and Enforcement Bureau for the Massachusetts Gaming Commission (the “Bureau”) which raised certain issues for consideration when evaluating the Company’s suitability as a qualifier in Massachusetts. In particular, the director primarily cited the Company’s business relationship to a license agreement with Gansevoort Group for branding of a hotel that was entered into in 2013. The recommendation of the director to the Massachusetts Gaming Commission was that the Company has not met its burden by clear and convincing evidence to establish its suitability. Although the Company strongly disagrees with the director’s recommendation, the Company has decided to withdraw its application as a qualifier in Massachusetts for the benefit of Sterling Suffolk. While it is too early to determine the resolution regarding the Company’s investment in this project, the approximate cash investment is $100 million as of September 30, 2013.
    
The Company announced that it has ended its marketing and licensing agreement with the Gansevoort Group with regards to the former Bill's Gambling Hall and Saloon. The Company is exploring re-branding opportunities and plans for the project remain otherwise unchanged.
Caesars Entertainment Operating Company, Inc. Results
As a substantial portion of the debt of Caesars Entertainment's consolidated group is issued by Caesars Entertainment Operating Company, Inc. ("CEOC"), the Company believes it is meaningful to provide information on the results of operations of CEOC, which are summarized below. CEOC's Summary of Operations, Supplemental Information, and Reconciliation of Net Loss Attributable to CEOC to Adjusted EBITDA, LTM Adjusted EBITDA-Pro Forma and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted, can be found later in this release.
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
  
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
  
Net revenues (1)
$
1,616.2

 
$
1,637.8

 
(1.3
)%
 
$
4,817.4

 
$
4,922.0

  
(2.1
)%
Loss from operations (1), (2)
(716.0
)
 
(275.5
)
 
(159.9
)%
 
(494.2
)
 
(121.7
)
  
(306.1
)%
Loss from continuing operations, net of income taxes (1)
(822.8
)
 
(529.8
)
 
(55.3
)%
 
(1,249.7
)
 
(1,063.2
)
 
(17.5
)%
Income/(loss) from discontinued operations, net of income taxes
11.8

 
(0.8
)
 
*

 
(29.5
)
 
(74.0
)
 
60.1
 %
Net loss attributable to CEOC
(809.0
)
 
(531.3
)
 
(52.3
)%
 
(1,281.9
)
 
(1,138.9
)
  
(12.6
)%
Property EBITDA (4)
380.4

 
384.0

 
(0.9
)%
 
1,104.4

 
1,227.8

  
(10.1
)%
Adjusted EBITDA (5)
369.4

 
351.3

 
5.2
 %
 
1,048.7

 
1,136.8

  
(7.7
)%
____________________________
*     Not meaningful
Caesars Entertainment Resort Properties Results
On October 11, 2013, Caesars Entertainment Resort Properties, LLC, Caesars Entertainment Resort Properties Finance, Inc., Harrah’s Atlantic City Holding, Inc., Harrah’s Las Vegas, LLC, Harrah’s Laughlin, LLC, Flamingo Las Vegas Holding, LLC, Paris Las Vegas Holding, LLC and Rio Properties, LLC, each a wholly-owned subsidiary of Caesars Entertainment Corporation, (i) completed the offering of $1,000 million aggregate principal amount of their 8% first-priority senior secured notes due 2020 and $1,150 million aggregate principal amount of their 11% second-priority senior secured notes due 2021 and (ii) entered into a first lien credit agreement governing their new $2,769.5 million senior secured credit facilities consisting of senior secured term loans

7


in an aggregate principal amount of $2,500.0 million and a senior secured revolving credit facility in an aggregate principal amount of up to $269.5 million. The above transactions are collectively referred to as the "Refinancing."
Upon the Refinancing, Octavius/Linq HoldCo formed an intermediate holding company, Octavius/Linq Intermediate Holding, LLC, for the purpose of owning its existing subsidiaries. On the closing date of the Refinancing, Caesars contributed all of the membership interests of Octavius/Linq Intermediate Holding, LLC to Rio Properties, LLC, a Casino Resort Property (the "Octavius/Linq Transfer"). Following the Octavius/Linq Transfer, Rio Properties, LLC, own Octavius/Linq Intermediate Holding, LLC and its subsidiaries, which are subsidiary guarantors under the Refinancing.
The Casino Resort Properties together with Octavius/Linq HoldCo and their subsidiaries are referred to as the Caesars Entertainment Resort Properties ("CERP"). The financial statements of CERP are presented herein on a combined basis as if the Refinancing and related reorganization had been completed as of September 30, 2013.
The Company believes it is meaningful to provide information on the combined results of operations of CERP which are summarized below. CERP's Supplemental Information and Reconciliation of Net Loss Attributable to CERP to Adjusted EBITDA can be found later in this release.
 
Quarter Ended September 30,
 
Percent
Favorable/
(Unfavorable)
 
Nine Months Ended September 30,
  
Percent
Favorable/
(Unfavorable)
(Dollars in millions)
2013
 
2012
 
 
2013
 
2012
  
Net revenues
$
507.2

 
$
521.8

 
(2.8
)%
 
$
1,516.0

 
$
1,550.9

  
(2.3
)%
Income from operations (2)
72.5

 
49.7

 
45.9
 %
 
188.9

 
148.2

 
27.5
 %
Net income/(loss)
23.6

 
(1.2
)
 
*

 
57.6

 
36.6

 
57.4
 %
Property EBITDA (4)
132.9

 
138.2

 
(3.8
)%
 
426.1

 
409.8

  
4.0
 %
Adjusted EBITDA (5)
123.8

 
123.3

 
0.4
 %
 
398.4

 
361.2

  
10.3
 %
____________________________
*     Not meaningful

(1)
Net revenues, income from operations, and loss from continuing operations, net of income taxes for all periods presented in the table above exclude the results of Harrah's St. Louis casino which was sold in November 2012, the results of Alea Leeds casino which was closed in March 2013 and the results of the subsidiaries that hold the Company's land concession in Macau, all of which are presented as discontinued operations.
(2)  
Income from operations for Caesars includes intangible and tangible asset impairment charges of $930.9 million and $419.0 million, for the three months ended September 30, 2013 and 2012, respectively, and includes intangible and tangible asset impairment charges of $1,055.6 million and $626.0 million for the nine months ended September 30, 2013 and 2012, respectively. Income from operations for CEOC includes intangible and tangible asset impairment charges of $925.4 million and $416.0 million, for the three months ended September 30, 2013 and 2012, respectively and includes intangible and tangible asset impairment charges of $1,025.7 million and $623.0 million for the nine months ended September 30, 2013 and 2012, respectively. Income from operations for CERP includes intangible and tangible asset impairment charges of $5.5 million and $3.0 million for the three months ended September 30, 2013 and 2012, respectively, and includes intangible and tangible asset impairment charges of $29.9 million and $3.0 million for the nine months ended September 30, 2013 and 2012, respectively.
(3) 
Basic and diluted loss per share for Caesars for the periods shown includes loss per share from discontinued operations. In the three months ended September 30, 2013, income from discontinued operations, net of income taxes was $0.09 per share and in the three months ended September 30, 2012, loss from discontinued operations, net of income taxes was $0.01 per share. Loss per share from discontinued operations for the nine months ended September 30, 2013 and 2012 was $0.24 per share and $0.59 per share, respectively.
(4)
Property EBITDA is a non-GAAP financial measure that is defined and reconciled to its most comparable GAAP measure later in this release. Property EBITDA is included because the Company's management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
(5)  
Adjusted EBITDA is a non-GAAP financial measure that is defined and reconciled to its most comparable GAAP measure later in this release. Adjusted EBITDA is included because management believes that Adjusted EBITDA provides investors with additional information that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Company. Adjusted EBITDA does not include the Pro Forma effect of adjustments related to properties, yet-to-be-realized cost savings from the Company's profitability improvement programs, discontinued operations and LTM Adjusted EBITDA-Pro Forma of CEOC's unrestricted subsidiaries.

8


Conference Call Information
Caesars Entertainment Corporation (NASDAQ: CZR) will host a conference call at 2 p.m. Pacific Time Tuesday, October 29, 2013 to review its third-quarter results. The call will be accessible in the Investor Relations section of www.caesars.com.
If you would like to ask questions and be an active participant in the call, you may dial 877-637-3723, or 832-412-1752 for international callers, and enter Conference ID 75999544 approximately 10 minutes before the call start time. A recording of the live call will be available on the Company's website for 90 days after the event.
About Caesars
Caesars Entertainment Corporation is the world's most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. Since its beginning in Reno, Nevada, 75 years ago, Caesars has grown through development of new resorts, expansions and acquisitions and now operates casinos on four continents. The Company's resorts operate primarily under the Caesars®, Harrah's® and Horseshoe® brand names. Caesars also owns the London Clubs International family of casinos. Caesars is focused on building loyalty and value with its guests through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. The Company is committed to environmental sustainability and energy conservation and recognizes the importance of being a responsible steward of the environment. For more information, please visit www.caesars.com.
Forward Looking Information
This release includes “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies, and future financial results of Caesars. These forward-looking statements are based on current expectations and projections about future events.
Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of Caesars may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission (including the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” contained therein):
•
the impact of the Company's substantial indebtedness and the restrictions in the Company's debt agreements;
•
access to available and reasonable financing on a timely basis, including the ability of the Company to refinance its indebtedness on acceptable terms;
•
the effects of local and national economic, credit, and capital market conditions on the economy, in general, and on the gaming industry, in particular;
•
the ability to realize the expense reductions from cost savings programs;
•
changes in the extensive governmental regulations to which the Company and its stockholders are subject, and changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines, and fines of courts, regulators, and governmental bodies;
•
the ability of the Company's customer-tracking, customer loyalty, and yield-management programs to continue to increase customer loyalty and same-store or hotel sales;
•
the effects of competition, including locations of competitors and operating and market competition;
•
the ability to recoup costs of capital investments through higher revenues;
•
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
•
the ability to timely and cost-effectively integrate companies that the Company acquires into its operations;

9


•
the potential difficulties in employee retention and recruitment as a result of the Company's substantial indebtedness or any other factor;
•
construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;
•
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;
•
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, including losses in revenues and damage to property, and the impact of severe weather conditions on the Company's ability to attract customers to certain of its facilities, such as the amount of losses and disruption to the Company as a result of Hurricane Sandy in late October 2012;
•
the effects of environmental and structural building conditions relating to the Company's properties;
•
access to insurance on reasonable terms for the Company's assets; and
•
the impact, if any, of unfunded pension benefits under multi-employer pension plans.
Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Caesars disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this release.



10


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except per share data)
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Casino
$
1,466.6

 
$
1,578.8

 
$
4,396.8

 
$
4,755.7

Food and beverage
382.9

 
389.2

 
1,149.2

 
1,156.6

Rooms
318.5

 
312.1

 
929.0

 
932.3

Management fees
14.5

 
12.5

 
42.3

 
34.4

Other
225.4

 
203.5

 
642.5

 
580.5

Reimbursable management costs
72.7

 
22.3

 
203.2

 
43.5

Less: casino promotional allowances
(300.6
)
 
(322.6
)
 
(881.7
)
 
(937.4
)
Net revenues
2,180.0

 
2,195.8

 
6,481.3

 
6,565.6

Operating expenses
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino (a)
803.2

 
902.2

 
2,457.6

 
2,725.1

Food and beverage (a)
168.8

 
169.8

 
503.5

 
501.3

Rooms (a)
76.9

 
74.3

 
232.4

 
230.1

Property, general, administrative, and other (a)
548.2

 
519.0

 
1,592.8

 
1,529.5

Reimbursable management costs
72.7

 
22.3

 
203.2

 
43.5

Depreciation and amortization
130.2

 
178.8

 
433.2

 
533.8

Write-downs, reserves, and project opening costs, net of
recoveries
0.5

 
32.8

 
44.7

 
56.9

Intangible and tangible asset impairment charges
930.9

 
419.0

 
1,055.6

 
626.0

Loss/(income) on interests in non-consolidated affiliates
4.0

 
(1.5
)
 
20.4

 
8.8

Corporate expense
37.0

 
51.7

 
114.3

 
145.2

Acquisition and integration costs
3.2

 
1.0

 
69.6

 
2.2

Amortization of intangible assets
41.9

 
43.2

 
124.4

 
129.6

Total operating expenses
2,817.5

 
2,412.6

 
6,851.7

 
6,532.0

(Loss)/income from operations
(637.5
)
 
(216.8
)
 
(370.4
)
 
33.6

Interest expense, net of interest capitalized
(563.0
)
 
(515.8
)
 
(1,677.7
)
 
(1,574.3
)
Gain on early extinguishments of debt
13.0

 
—

 
17.5

 
79.5

Gain on partial sale of subsidiary
—

 
—

 
44.1

 
—

Other income, including interest income
0.5

 
4.7

 
8.9

 
19.4

Loss from continuing operations before income taxes
(1,187.0
)
 
(727.9
)
 
(1,977.6
)
 
(1,441.8
)
Benefit for income taxes
413.4

 
225.3

 
819.3

 
489.5

Loss from continuing operations, net of income taxes
(773.6
)
 
(502.6
)
 
(1,158.3
)
 
(952.3
)
Discontinued operations
 
 
 
 
 
 
 
Income/(loss) from discontinued operations
14.9

 
0.8

 
(29.3
)
 
(69.4
)
Provision for income taxes
(3.1
)
 
(1.6
)
 
(0.2
)
 
(4.6
)
Income/(loss) from discontinued operations, net of income taxes
11.8

 
(0.8
)
 
(29.5
)
 
(74.0
)
Net loss
(761.8
)
 
(503.4
)
 
(1,187.8
)
 
(1,026.3
)
Less: net loss/(income) attributable to noncontrolling interests
0.4

 
(2.1
)
 
(3.5
)
 
(1.5
)
Net loss attributable to Caesars
$
(761.4
)
 
$
(505.5
)
 
$
(1,191.3
)
 
$
(1,027.8
)
Loss per share - basic and diluted
 
 
 
 
 
 
 
Loss per share from continuing operations
$
(6.12
)
 
$
(4.02
)
 
$
(9.23
)
 
$
(7.62
)
Income/(loss) per share from discontinued operations
0.09

 
(0.01
)
 
(0.24
)
 
(0.59
)
Net loss per share
$
(6.03
)
 
$
(4.03
)
 
$
(9.47
)
 
$
(8.21
)
(a) Property operating expenses are comprised of casino, food and beverage, rooms, and property, general, administrative and other expenses. 

11


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEETS
(UNAUDITED)
(In millions)
 
September 30, 2013
 
December 31, 2012
Assets
 
 
 
Current assets
 
 
 
           Cash and cash equivalents
$
1,707.9

 
$
1,757.5

           Restricted Cash (a)
123.4

 
833.6

           Assets held for sale (b)
5.4

 
5.1

           Other current assets
887.5

 
897.4

Total current assets
2,724.2

 
3,493.6

Property and equipment, net
14,916.4

 
15,701.7

Goodwill and other intangible assets
6,679.7

 
7,146.0

Restricted cash
403.6

 
364.6

Assets held for sale (b)
466.0

 
471.2

Other long-term assets
906.5

 
821.0

 
$
26,096.4

 
$
27,998.1

Liabilities and Stockholders’ Deficit
 
 
 
Current liabilities
 
 
 
           Current portion of long-term debt (a)
$
166.4

 
$
879.9

           Liabilities held for sale (b)
0.7

 
3.8

           Other current liabilities
1,930.4

 
1,704.6

Total current liabilities
2,097.5

 
2,588.3

Long-term debt
21,173.8

 
20,532.2

Liabilities held for sale (b)
54.3

 
52.1

Other long-term liabilities
4,267.6

 
5,157.1

 
27,593.2

 
28,329.7

Total Caesars stockholders’ deficit
(1,578.7
)
 
(411.7
)
Non-controlling interests
81.9

 
80.1

Total deficit
(1,496.8
)
 
(331.6
)
 
$
26,096.4

 
$
27,998.1


(a)
The balance of restricted cash at December 31, 2012 includes $750.0 million of escrow proceeds related to the Company's December 13, 2012 bond offering and the related debt obligation is included in the current portion of long-term debt. Escrow conditions were met in February 2013, at which time the cash was released from restriction and the debt obligation was re-classified to long-term.
(b)  
The balances at September 30, 2013 and December 31, 2012 relate to the subsidiaries that hold the Company's land concession in Macau and $7.3 million of non-current assets held for sale related to the Company's investment in a real estate project initiated by the Casino Reinvestment Development Authority (“CRDA”), a New Jersey state governmental agency responsible for directing the spending of casino reinvestment funds for the benefit of Atlantic City.

12


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
Property EBITDA is presented as a supplemental measure of the Company's performance. Property EBITDA is defined as revenues less property operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) (benefit)/provision for income taxes, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that the Company does not consider indicative of its ongoing operating performance at an operating property level. In evaluating Property EBITDA you should be aware that, in the future, the Company may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Property EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Property EBITDA is a non-GAAP financial measure commonly used in the Company's industry and should not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Property EBITDA is included because management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
The following tables reconcile net loss attributable to Caesars to Property EBITDA for the periods indicated.
 
Quarter Ended September 30, 2013
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed, Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(761.4
)
Net loss attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
(0.4
)
Net loss
 
 
 
 
 
 
 
 
 
 
(761.8
)
Income from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(11.8
)
Loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(773.6
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(413.4
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(1,187.0
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(0.5
)
Gain on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(13.0
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
563.0

Income/(loss) from operations
$
146.9

 
$
(494.7
)
 
$
(184.2
)
 
$
(105.5
)
 
 
 
(637.5
)
Depreciation and amortization
55.3

 
28.8

 
40.2

 
5.9

 
 
 
130.2

Amortization of intangible assets
19.0

 
4.0

 
9.3

 
9.6

 
 
 
41.9

Intangible and tangible asset impairment charges
5.5

 
536.2

 
296.7

 
92.5

 
 
 
930.9

Write-downs, reserves, and project opening costs, net of
recoveries
(3.9
)
 
3.7

 
0.6

 
0.1

 
 
 
0.5

Acquisition and integration costs
—

 
—

 
—

 
3.2

 
 
 
3.2

(Income)/loss on interests in non-consolidated affiliates
(0.3
)
 
—

 
(0.2
)
 
4.5

 
 
 
4.0

Corporate expense
—

 
—

 
—

 
37.0

 
 
 
37.0

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(0.2
)
 
(0.2
)
Property EBITDA
$
222.4

 
$
77.9

 
$
162.3

 
$
47.6

 
$
(0.2
)
 
$
510.0




13


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
 
Quarter Ended September 30, 2012
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed, Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(505.5
)
Net income attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
2.1

Net loss
 
 
 
 
 
 
 
 
 
 
(503.4
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
0.8

Loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(502.6
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(225.3
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(727.9
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(4.7
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
515.8

Income/(loss) from operations
$
62.4

 
$
47.3

 
$
(178.9
)
 
$
(147.6
)
 
 
 
(216.8
)
Depreciation and amortization
66.9

 
44.6

 
53.4

 
13.9

 
 
 
178.8

Amortization of intangible assets
19.0

 
4.0

 
9.3

 
10.9

 
 
 
43.2

Intangible and tangible asset impairment charges
3.0

 
—

 
292.0

 
124.0

 
 
 
419.0

Write-downs, reserves, and project opening costs, net of
recoveries
13.2

 
3.9

 
25.1

 
(9.4
)
 
 
 
32.8

Acquisition and integration costs
—

 
—

 
—

 
1.0

 
 
 
1.0

Income on interests in non-consolidated affiliates
(0.6
)
 
—

 
(0.2
)
 
(0.7
)
 
 
 
(1.5
)
Corporate expense
—

 
—

 
—

 
51.7

 
 
 
51.7

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
4.0

 
4.0

Property EBITDA
$
163.9

 
$
99.8

 
$
200.7

 
$
43.8

 
$
4.0

 
$
512.2


14


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
 
Nine Months Ended September 30, 2013
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed, Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(1,191.3
)
Net income attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
3.5

Net loss
 
 
 
 
 
 
 
 
 
 
(1,187.8
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
29.5

Loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(1,158.3
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(819.3
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(1,977.6
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(8.9
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Gains on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(17.5
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,677.7

Income/(loss) from operations
$
377.0

 
$
(496.0
)
 
$
(38.5
)
 
$
(212.9
)
 
 
 
(370.4
)
Depreciation and amortization
174.8

 
103.3

 
130.2

 
24.9

 
 
 
433.2

Amortization of intangible assets
56.9

 
12.0

 
27.7

 
27.8

 
 
 
124.4

Intangible and tangible asset impairment charges
5.5

 
558.6

 
399.0

 
92.5

 
 
 
1,055.6

Write-downs, reserves, and project opening costs, net of
recoveries
19.9

 
14.3

 
5.0

 
5.5

 
 
 
44.7

Acquisition and integration costs
—

 
—

 
—

 
69.6

 
 
 
69.6

(Income)/loss on interests in non-consolidated affiliates
(3.0
)
 
—

 
(0.5
)
 
23.9

 
 
 
20.4

Corporate expense
—

 
—

 
—

 
114.3

 
 
 
114.3

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(1.7
)
 
(1.7
)
Property EBITDA
$
631.0

 
$
192.2

 
$
522.9

 
$
145.7

 
$
(1.7
)
 
$
1,490.1


 
Nine Months Ended September 30, 2012
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed, Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(1,027.8
)
Net income attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
1.5

Net loss
 
 
 
 
 
 
 
 
 
 
(1,026.3
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
74.0

Loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(952.3
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(489.5
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(1,441.8
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(19.4
)
Gains on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(79.5
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,574.3

Income/(loss) from operations
$
310.4

 
$
82.4

 
$
(116.5
)
 
$
(242.7
)
 
 
 
33.6

Depreciation and amortization
201.2

 
134.1

 
157.5

 
41.0

 
 
 
533.8

Amortization of intangible assets
56.9

 
12.0

 
27.7

 
33.0

 
 
 
129.6

Intangible and tangible asset impairment charges
3.0

 
—

 
459.5

 
163.5

 
 
 
626.0

Write-downs, reserves, and project opening costs, net of
recoveries
20.4

 
6.2

 
37.2

 
(6.9
)
 
 
 
56.9

Acquisition and integration costs
—

 
—

 
—

 
2.2

 
 
 
2.2

(Income)/loss on interests in non-consolidated affiliates
(2.2
)
 
2.2

 
(0.5
)
 
9.3

 
 
 
8.8

Corporate expense
—

 
—

 
—

 
145.2

 
 
 
145.2

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
50.9

 
50.9

Property EBITDA
$
589.6

 
$
236.9

 
$
564.9

 
$
144.7

 
$
50.9

 
$
1,587.0



15


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION TO ADJUSTED EBITDA AND LTM ADJUSTED EBITDA-PRO FORMA
(UNAUDITED)
Adjusted EBITDA is defined as earnings before interest expense, income taxes, and depreciation and amortization ("EBITDA") further adjusted to exclude certain non-cash and other items required or permitted in calculating covenant compliance under the indenture governing CEOC's secured credit facilities.
Last twelve months ("LTM") Adjusted EBITDA-Pro Forma is defined as Adjusted EBITDA further adjusted to include Pro Forma adjustments related to properties, estimated cost savings yet-to-be-realized and adjustments for discontinued operations.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma are presented as supplemental measures of the Company's performance and management believes that Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma provide investors with additional information and allow a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Company.
Because not all companies use identical calculations, the presentation of Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma may not be comparable to other similarly titled measures of other companies.
The following table reconciles net loss attributable to Caesars to Adjusted EBITDA for the periods indicated:
 
Quarter Ended September 30,
(In millions)
2013
 
2012
Net loss attributable to Caesars
$
(761.4
)
 
$
(505.5
)
Interest expense, net of interest capitalized and interest income
562.3

 
512.3

Benefit for income taxes (a)
(410.3
)
 
(223.7
)
Depreciation and amortization (b)
175.4

 
228.2

EBITDA
(434.0
)
 
11.3

Project opening costs, abandoned projects and development costs (c)
9.3

 
31.0

Acquisition and integration costs (d)
3.2

 
1.1

Gains on early extinguishments of debt (e)
(13.0
)
 
—

Net income/(loss) attributable to non-controlling interests, net of
(distributions) (f)
3.5

 
(0.6
)
Impairments of intangible and tangible assets (g)
915.7

 
419.0

Non-cash expense for stock compensation benefits (h)
8.4

 
9.9

Gain on sale on partial sale of subsidiary (i)
—

 
—

Other items (j)
14.9

 
12.8

               Adjusted EBITDA 
$
508.0

 
$
484.5




16


The following table reconciles net loss attributable to Caesars to Adjusted EBITDA for the periods indicated, and reconciles net loss attributable to Caesars to LTM Adjusted EBITDA-Pro Forma for the last twelve months ended September 30, 2013.
 
(1)
 
(2)
 
(3)
 
 
(In millions)
Nine Months Ended September 30, 2013
 
Nine Months Ended September 30, 2012
 
Year Ended December 31, 2012
 
(1)-(2)+(3)
LTM
Net loss attributable to Caesars
$
(1,191.3
)
 
$
(1,027.8
)
 
$
(1,497.5
)
 
$
(1,661.0
)
Interest expense, net of interest capitalized and interest income
1,669.0

 
1,557.4

 
2,079.2

 
2,190.8

Benefit for income taxes (a)
(819.1
)
 
(484.9
)
 
(820.4
)
 
(1,154.6
)
Depreciation and amortization (b)
567.4

 
692.0

 
931.1

 
806.5

EBITDA
226.0

 
736.7

 
692.4

 
181.7

Project opening costs, abandoned projects and development costs (c)
43.7

 
40.9

 
71.7

 
74.5

Acquisition and integration costs (d)
69.6

 
2.2

 
6.1

 
73.5

Gain on early extinguishments of debt (e)
(17.5
)
 
(79.5
)
 
(136.0
)
 
(74.0
)
Net income/(loss) attributable to non-controlling interests, net of
(distributions) (f)
2.2

 
(4.1
)
 
(3.3
)
 
3.0

Impairments of intangible and tangible assets (g)
1,067.1

 
727.0

 
1,168.7

 
1,508.8

Non-cash expense for stock compensation benefits (h)
18.1

 
43.0

 
55.1

 
30.2

     Adjustments for recoveries from insurance claims for flood
losses (k)
—

 
(6.6
)
 
(6.6
)
 
—

Gain on sale of discontinued operations (l)
0.7

 
—

 
(9.3
)
 
(8.6
)
Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

 
—

 
(44.1
)
Other items (j)
82.4

 
58.0

 
98.9

 
123.3

             Adjusted EBITDA
$
1,448.2

 
$
1,517.6

 
$
1,937.7

 
1,868.3

Pro Forma adjustments related to properties (m)
 
 
 
 
 
 
7.4

Pro Forma adjustment for estimated cost savings yet-to-be-realized (n)
 
 
 
 
 
 
126.2

Pro Forma adjustments for discontinued operations (o)
 
 
 
 
 
 
5.5

              LTM Adjusted EBITDA-Pro Forma
 
 
 
 
 
 
$
2,007.4


(a) 
Amounts include a provision for income taxes related to discontinued operations of $3.1 million and $1.6 million for the three months ended September 30, 2013 and 2012, respectively, a provision for income taxes related to discontinued operations of $0.2 million, $4.6 million and $50.1 million for the nine months ended September 30, 2013 and 2012, and for the year ended December 31, 2012, respectively.
(b) 
Amounts include depreciation and amortization related to discontinued operations of $3.2 million for the three months ended September 30, 2012. There was no depreciation and amortization related to discontinued operations for the three months ended September 30, 2013. Amounts include depreciation and amortization related to discontinued operations of $0.2 million, $19.3 million and $29.0 million for the nine months ended September 30, 2013 and 2012 and for the year ended December 31, 2012, respectively.
(c) 
Amounts represent pre-opening costs incurred in connection with new property openings and expansion projects at existing properties, as well as any non-cash write-offs of abandoned development projects. Amounts include reserves related to the closure of Alea Leeds in March 2013 which are included in loss from discontinued operations of $15.8 million for the nine months ended September 30, 2013 and $4.8 million for the three months ended September 30, 2012. There were no reserves related to discontinued operations for the three months ended September 30, 2013, the nine months ended September 30, 2012 and for the year ended December 31, 2012.
(d) 
Amounts include certain costs associated with acquisition and development activities and reorganization activities which are infrequently occurring costs.
(e) 
Amounts represent the difference between the fair value of consideration paid and the book value, net of deferred financing costs, of debt retired through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.
(f) 
Amounts represent minority owners’ share of income/(loss) from the Company's majority-owned consolidated subsidiaries, net of cash distributions to minority owners, which is a non-cash item as it excludes any cash distributions.
(g) 
Amounts represent non-cash charges to impair intangible and tangible assets primarily resulting from changes in the business outlook in light of economic conditions. Amounts include impairment charges related to discontinued operations of $11.5 million, $101.0 million and $101.0 million for the nine months ended September 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. For the three months ended September 30, 2013 amounts include $15.2 million increase in the fair value less cost to sell related to the Company's land concessions in Macau. There were no impairment charges related to discontinued operations for the three months ended September 30, 2012.
(h) 
Amounts represent non-cash stock-based compensation expense related to stock options and restricted stock granted to the Company's employees.
(i) 
Amounts represent the gain recognized on the sale of 45% of Baluma S.A to Enjoy S.A.

17


(j) 
Amounts represent add-backs and deductions from EBITDA, whether permitted and/or required under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, included in arriving at LTM Adjusted EBITDA-Pro Forma but not separately identified. Such add-backs and deductions include litigation awards and settlements, severance and relocation costs, sign-on and retention bonuses, permit remediation costs, gains and losses from disposals of assets, costs incurred in connection with implementing the Company's efficiency and cost-saving programs, business optimization expenses, the Company's insurance policy deductibles incurred as a result of catastrophic events such as floods and hurricanes, one time sales tax assessments and accruals, project start-up costs, non-cash equity in earnings of non-consolidated affiliates (net of distributions), and adjustments to include controlling interests' portion of Baluma S.A. adjusted EBITDA.
(k) 
Amounts represent adjustments for insurance claims related to lost profits during the floods that occurred in 2011.
(l) 
Amount represents the gain recognized on the sale of the Harrah's St. Louis casino.
(m) 
Amounts represent the estimated annualized impact of operating results related to newly completed construction projects, combined with the estimated annualized EBITDA impact associated with properties acquired during the period.
(n) 
Amount represents adjustments to reflect the impact of annualized run-rate cost savings and anticipated future cost savings to be realized from the Company's announced Project Renewal and other profitability improvement and cost-savings programs.
(o) 
Per CEOC's senior secured credit facilities, EBITDA related to the Company's discontinued operations are deducted from LTM Adjusted EBITDA - Pro Forma.



18


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
Property EBITDA is presented as a supplemental measure of CEOC's performance. Property EBITDA is defined as revenues less property operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) (benefit)/provision for income taxes, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that the Company does not consider indicative of CEOC's ongoing operating performance at an operating property level. In evaluating Property EBITDA you should be aware that in the future, CEOC may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Property EBITDA should not be construed as an inference that CEOC's future results will be unaffected by unusual or unexpected items.
Property EBITDA is a non-GAAP financial measure commonly used in the Company's industry and should not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Property EBITDA is presented because management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
The following tables reconcile net loss attributable to CEOC to Property EBITDA for the periods indicated.
 
Quarter Ended September 30, 2013
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed,
Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(809.0
)
Net loss attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
(2.0
)
Net loss
 
 
 
 
 
 
 
 
 
 
(811.0
)
Income from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(11.8
)
Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(822.8
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(441.6
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(1,264.4
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(1.1
)
Loss on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
0.3

Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
549.2

Income/(loss) from operations
$
79.8

 
$
(508.8
)
 
$
(189.9
)
 
$
(97.1
)
 
 
 
(716.0
)
Depreciation and amortization
37.3

 
19.5

 
39.2

 
5.4

 
 
 
101.4

Amortization of intangible assets
8.2

 
3.0

 
6.3

 
5.4

 
 
 
22.9

Intangible and tangible asset impairment charges
—

 
536.2

 
296.7

 
92.5

 
 
 
925.4

Write-downs, reserves, and project opening costs, net of
recoveries
7.1

 
3.7

 
0.7

 
—

 
 
 
11.5

Acquisition and integration costs
—

 
—

 
—

 
3.1

 
 
 
3.1

(Income)/loss on interests in non-consolidated affiliates
—

 
—

 
(0.2
)
 
4.5

 
 
 
4.3

Corporate expense
—

 
—

 
—

 
28.0

 
 
 
28.0

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(0.2
)
 
(0.2
)
Property EBITDA
$
132.4

 
$
53.5

 
$
152.7

 
$
42.0

 
$
(0.2
)
 
$
380.4





19


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
 
Quarter Ended September 30, 2012
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed,
Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(531.3
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
0.7

Net loss
 
 
 
 
 
 
 
 
 
 
(530.6
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
0.8

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(529.8
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(237.3
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(767.1
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(4.0
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
495.6

Income/(loss) from operations
$
14.8

 
$
27.5

 
$
(184.9
)
 
$
(132.9
)
 
 
 
(275.5
)
Depreciation and amortization
41.2

 
32.8

 
51.6

 
13.2

 
 
 
138.8

Amortization of intangible assets
8.2

 
3.0

 
6.3

 
9.7

 
 
 
27.2

Intangible and tangible asset impairment charges
—

 
—

 
292.0

 
124.0

 
 
 
416.0

Write-downs, reserves, and project opening costs, net of
recoveries
11.0

 
3.7

 
25.1

 
(9.5
)
 
 
 
30.3

Acquisition and integration costs
—

 
—

 
—

 
1.0

 
 
 
1.0

Income on interests in non-consolidated affiliates
—

 
—

 
(0.2
)
 
(0.7
)
 
 
 
(0.9
)
Corporate expense
—

 
—

 
—

 
43.1

 
 
 
43.1

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
4.0

 
4.0

Property EBITDA
$
75.2

 
$
66.9

 
$
190.0

 
$
47.9

 
$
4.0

 
$
384.0


20


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
 
Nine Months Ended September 30, 2013
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed,
Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(1,281.9
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
2.7

Net loss
 
 
 
 
 
 
 
 
 
 
(1,279.2
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
29.5

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(1,249.7
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(852.3
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(2,102.0
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(11.4
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Loss on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
37.1

Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,626.2

Income/(loss) from operations
$
161.8

 
$
(490.8
)
 
$
(59.4
)
 
$
(105.8
)
 
 
 
(494.2
)
Depreciation and amortization
117.4

 
71.3

 
127.0

 
23.4

 
 
 
339.1

Amortization of intangible assets
24.5

 
8.9

 
18.9

 
16.5

 
 
 
68.8

Intangible and tangible asset impairment charges
—

 
534.2

 
399.0

 
92.5

 
 
 
1,025.7

Write-downs, reserves, and project opening costs, net of
recoveries
20.8

 
7.1

 
5.0

 
(2.5
)
 
 
 
30.4

Acquisition and integration costs
—

 
—

 
—

 
20.5

 
 
 
20.5

(Income)/loss on interests in non-consolidated affiliates
—

 
—

 
(0.5
)
 
23.5

 
 
 
23.0

Corporate expense
—

 
—

 
—

 
92.8

 
 
 
92.8

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(1.7
)
 
(1.7
)
Property EBITDA
$
324.5

 
$
130.7

 
$
490.0

 
$
160.9

 
$
(1.7
)
 
$
1,104.4


 
Nine Months Ended September 30, 2012
(In millions)
Las
Vegas
 

Atlantic
Coast
 
Other U.S.
 
Managed,
Int'l and Other
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(1,138.9
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
1.7

Net loss
 
 
 
 
 
 
 
 
 
 
(1,137.2
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
74.0

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(1,063.2
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(549.8
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(1,613.0
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(18.4
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,509.7

Income/(loss) from operations
$
143.7

 
$
46.0

 
$
(135.7
)
 
$
(175.7
)
 
 
 
(121.7
)
Depreciation and amortization
125.7

 
96.7

 
152.3

 
40.4

 
 
 
415.1

Amortization of intangible assets
24.5

 
8.9

 
18.9

 
26.1

 
 
 
78.4

Intangible and tangible asset impairment charges
—

 
—

 
459.5

 
163.5

 
 
 
623.0

Write-downs, reserves, and project opening costs, net of
recoveries
14.3

 
5.7

 
37.2

 
(6.9
)
 
 
 
50.3

Acquisition and integration costs
—

 
—

 
—

 
1.9

 
 
 
1.9

Loss/(income) on interests in non-consolidated affiliates
—

 
1.1

 
(0.5
)
 
9.3

 
 
 
9.9

Corporate expense
—

 
—

 
—

 
120.0

 
 
 
120.0

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
50.9

 
50.9

Property EBITDA
$
308.2

 
$
158.3

 
$
531.7

 
$
178.7

 
$
50.9

 
$
1,227.8



21


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC.
TO ADJUSTED EBITDA, LTM ADJUSTED EBITDA-PRO FORMA AND
LTM ADJUSTED EBITDA-PRO FORMA - CEOC RESTRICTED
(UNAUDITED)
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash and other items required or permitted in calculating covenant compliance under the indenture governing CEOC's the credit facility.
LTM Adjusted EBITDA-Pro Forma is defined as Adjusted EBITDA further adjusted to include Pro Forma adjustments related to properties, estimated cost savings yet-to-be-realized and discontinued operations.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma are presented as supplemental measures of CEOC's performance and management believes that Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma provide investors with additional information and allow a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of CEOC.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma include the results and adjustments of CEOC on a consolidated basis without the exclusion of CEOC's unrestricted subsidiaries, and therefore, are different than the calculations used to determine compliance with debt covenants under the credit facility. The reconciliation of net loss attributable to CEOC to LTM Adjusted EBITDA-Pro Forma on the following page includes an additional calculation to exclude the LTM Adjusted EBITDA-Pro Forma of the unrestricted subsidiaries of CEOC resulting in an amount used to determine compliance with debt covenants ("LTM Adjusted EBITDA-Pro Forma - CEOC Restricted").
Because not all companies use identical calculations, the presentation of CEOC's Adjusted EBITDA, LTM Adjusted EBITDA-Pro Forma, and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted may not be comparable to other similarly titled measures of other companies.
The following table reconciles net loss attributable to CEOC to Adjusted EBITDA for the periods indicated:
 
Quarter Ended September 30,
(In millions)
2013
 
2012
Net loss attributable to CEOC
$
(808.9
)
 
$
(531.3
)
Interest expense, net of capitalized interest and interest income
548.1

 
492.4

Benefit for income taxes (a)
(438.6
)
 
(235.7
)
Depreciation and amortization (b)
127.4

 
172.4

EBITDA  
(572.0
)
 
(102.2
)
Project opening costs, abandoned projects and development costs (c)
9.4

 
31.1

Acquisition and integration costs (d)
3.1

 
1.0

Loss on early extinguishment of debt (e)
0.3

 
—

Net income/(loss) attributable to non-controlling interests, net of
(distributions) (f)
1.8

 
(2.1
)
Impairments of intangible and tangible assets (g)
910.2

 
416.0

Non-cash expense for stock compensation benefits (h)
1.4

 
7.5

Other items (j)
15.2

 
—

               Adjusted EBITDA 
$
369.4

 
$
351.3


22



The following table reconciles net loss attributable to CEOC to Adjusted EBITDA for the periods indicated, and reconciles net loss attributable to CEOC to LTM Adjusted EBITDA-Pro Forma, and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted for the last twelve months ended September 30, 2013.
 
(1)
 
(2)
 
(3)
 
 
(In millions)
Nine Months Ended September 30, 2013
 
Nine Months Ended September 30, 2012
 
Year Ended December 31, 2012
 
(1)-(2)+(3)
LTM
Net loss attributable to CEOC
$
(1,281.9
)
 
$
(1,138.9
)
 
$
(1,627.4
)
 
$
(1,770.4
)
Interest expense, net of capitalized interest and interest income
1,615.0

 
1,493.7

 
1,995.7

 
2,117.0

Benefit for income taxes (a)
(852.1
)
 
(545.2
)
 
(884.5
)
 
(1,191.4
)
Depreciation and amortization (b)
417.8

 
522.1

 
701.7

 
597.4

EBITDA  
(101.2
)
 
331.7

 
185.5

 
(247.4
)
Project opening costs, abandoned projects and development costs (c)
43.3

 
41.0

 
55.9

 
58.2

Acquisition and integration costs (d)
20.5

 
1.9

 
5.8

 
24.4

Loss on early extinguishments of debt (e)
37.1

 
—

 
—

 
37.1

Net income/(loss) attributable to non-controlling interests, net of
(distributions))(f)
1.4

 
(3.9
)
 
(4.2
)
 
1.1

Impairments of intangible and tangible assets (g)
1,037.2

 
724.0

 
1,165.7

 
1,478.9

Non-cash expense for stock compensation benefits (h)
15.3

 
23.9

 
33.4

 
24.8

      Adjustments for recoveries from insurance claims for flood losses (k)
—

 
(6.6
)
 
(6.6
)
 
—

Gain on sale of discontinued operations (l)
0.7

 
—

 
(9.3
)
 
(8.6
)
Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

 
—

 
(44.1
)
Other items (j)
38.5

 
24.8

 
53.3

 
67.0

               Adjusted EBITDA
$
1,048.7

 
$
1,136.8

 
$
1,479.5

 
1,391.4

Pro Forma adjustments related to properties (m)
 
 
 
 
 
 
7.4

Pro Forma adjustment for estimated cost savings yet-to-be-realized (n)
 
 
 
 
 
 
89.1

Pro Forma adjustments for discontinued operations (o)
 
 
 
 
 
 
5.5

               LTM Adjusted EBITDA-Pro Forma
 
 
 
 
 
 
1,493.4

LTM Adjusted EBITDA-Pro Forma of CEOC's unrestricted
subsidiaries
 
 
 
 
 
 
(122.5
)
LTM Adjusted EBITDA-Pro Forma - CEOC Restricted
 
 
 
 
 
 
$
1,370.9


(a) 
Amounts include a provision for income taxes related to discontinued operations of $3.1 million and $1.6 million for the three months ended September 30, 2013 and 2012, respectively, a provision for income taxes related to discontinued operations of $0.2 million, $4.6 million and $50.1 million for the nine months ended September 30, 2013 and 2012, and for the year ended December 31, 2012, respectively.
(b)
Amounts include depreciation and amortization related to discontinued operations of $3.2 million for the three months ended September 30, 2012. There was no depreciation and amortization related to discontinued operations for the three months ended September 30, 2013. Amounts include depreciation and amortization related to discontinued operations of $0.2 million, $19.3 million and $29.0 million for the nine months ended September 30, 2013 and 2012 and for the year ended December 31, 2012, respectively.
(c)
Amounts represent pre-opening costs incurred in connection with new property openings and expansion projects at existing properties, as well as any non-cash write-offs of abandoned development projects. Amounts include reserves related to the closure of Alea Leeds in March 2013 which are included in loss from discontinued operations of 15.8 million for the nine months ended September 30, 2013 and $4.8 million for the three months ended September 30, 2012. There were no reserves related to discontinued operations for the three months ended September 30, 2013, the nine months ended September 30, 2012 and for the year ended December 31, 2012.
(d) 
Amounts include certain costs associated with acquisition and development activities and reorganization activities which are infrequently occurring costs.
(e) 
Amounts represent the difference between the fair value of consideration paid and the book value, net of deferred financing costs, of debt retired through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.
(f) 
Amounts represent minority owners’ share of income/(loss) from CEOC's majority-owned consolidated subsidiaries, net of cash distributions to minority owners, which is a non-cash item as it excludes any cash distributions.

23


(g) 
Amounts represent non-cash charges to impair intangible and tangible assets primarily resulting from changes in the business outlook in light of economic conditions. Amounts include impairment charges related to discontinued operations of $11.5 million, $101.0 million and $101.0 million for the nine months ended September 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. For the three months ended September 30, 2013 amounts include $15.2 million increase in the fair value less cost to sell related to the Company's land concessions in Macau. There were no impairment charges related to discontinued operations for the three months ended September 30, 2012.
(h) 
Amounts represent non-cash stock-based compensation expense related to stock options and restricted stock granted to CEOC's employees.
(i) 
Amounts represent the gain recognized on the sale of 45% of Baluma S.A to Enjoy S.A.
(j) 
Amounts represent add-backs and deductions from EBITDA, whether permitted and/or required under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, included in arriving at LTM Adjusted EBITDA-Pro Forma but not separately identified. Such add-backs and deductions include litigation awards and settlements, severance and relocation costs, sign-on and retention bonuses, permit remediation costs, gains and losses from disposals of assets, costs incurred in connection with implementing the Company's efficiency and cost-saving programs, business optimization expenses, the Company's insurance policy deductibles incurred as a result of catastrophic events such as floods and hurricanes, one time sales tax assessments and accruals, project start-up costs, non-cash equity in earnings of non-consolidated affiliates (net of distributions), and adjustments to include controlling interests' portion of Baluma S.A. adjusted EBITDA.
(k) 
Amounts represent adjustments for insurance claims related to lost profits during the floods that occurred in 2011.
(l) 
Amount represents the gain recognized on the sale of the Harrah's St. Louis casino.
(m) 
Amounts represent the estimated annualized impact of operating results related to newly completed construction projects, combined with the estimated annualized EBITDA impact associated with properties acquired during the period.
(n) 
Amount represents adjustments of CEOC to reflect the impact of annualized run-rate cost-savings and anticipated future cost savings to be realized from the Company's announced Project Renewal and other profitability improvement and cost savings programs.
(o) 
Per CEOC's senior secured credit facilities, EBITDA related to the Company's discontinued operations are deducted from LTM Adjusted EBITDA - Pro Forma.



24


CAESARS ENTERTAINMENT RESORT PROPERTIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME/(LOSS) TO PROPERTY EBITDA
(UNAUDITED)
Property EBITDA is presented as a supplemental measure of the Company's performance. Property EBITDA is defined as revenues less property operating expenses and is comprised of net income before (i) interest expense, net of interest capitalized and interest income, (ii) provision for income taxes, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that we do not consider indicative of our ongoing operating performance at an operating property level. In evaluating Property EBITDA you should be aware that, in the future, we may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Property EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Property EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Property EBITDA is included because management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
The following table reconciles net income to Property EBITDA:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2013
 
2012
 
2013
 
2012
Net income/(loss)
$
23.6

 
$
(1.2
)
 
$
57.6

 
$
36.6

Provision/(benefit) for income taxes
12.9

 
(5.8
)
 
26.0

 
14.1

Income/(loss) before income taxes
36.5

 
(7.0
)
 
83.6

 
50.7

Other income, including interest income
—

 
(0.3
)
 
(0.1
)
 
(0.8
)
Gain on early extinguishments of debt
(13.4
)
 
—

 
(52.4
)
 
(78.5
)
Interest expense, net of interest capitalized
49.4

 
57.0

 
157.8

 
176.8

Income from operations
72.5

 
49.7

 
188.9

 
148.2

Depreciation and amortization
36.8

 
47.1

 
118.5

 
145.0

Amortization of intangible assets
14.8

 
14.8

 
44.3

 
44.3

Intangible and tangible asset impairment charges
5.5

 
3.0

 
29.9

 
3.0

Write-downs, reserves, and project opening costs, net of recoveries
(8.0
)
 
7.8

 
10.7

 
13.7

Income on interests in non-consolidated affiliates
(0.3
)
 
(0.6
)
 
(3.0
)
 
(1.1
)
Corporate expense
11.6

 
16.4

 
36.8

 
56.7

Property EBITDA
$
132.9

 
$
138.2

 
$
426.1

 
$
409.8


25


CAESARS ENTERTAINMENT RESORT PROPERTIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME/(LOSS) TO ADJUSTED EBITDA AND LTM ADJUSTED EBITDA-PRO FORMA
(UNAUDITED)
LTM Adjusted EBITDA-Pro Forma is defined as Adjusted EBITDA further adjusted to include Pro Forma adjustments related to properties and estimated cost savings yet-to-be-realized.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma are presented as supplemental measures of CERPs performance and management believes that Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma provide investors with additional information and allow a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of CERP.
Because not all companies use identical calculations, the presentation of CERP's Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma may not be comparable to other similarly titled measures of other companies.
The following table reconciles net income/(loss) to Adjusted EBITDA for the periods indicated:
 
Quarter Ended September 30,
(In millions)
2013
 
2012
Net income/(loss)
$
23.6

 
$
(1.2
)
Interest expense, net of capitalized interest and interest income
49.4

 
56.8

Provision/(benefit) for income taxes
12.9

 
(5.8
)
Depreciation and amortization
51.6

 
61.8

EBITDA  
137.5

 
111.6

Project opening costs, abandoned projects and development costs (a)
3.0

 
—

Gain on early extinguishment of debt (b)
(13.4
)
 
—

Impairments of intangible and tangible assets (c)
5.5

 
3.0

Non-cash expense for stock compensation benefits (d)
0.2

 
(1.3
)
Other items (e)
(9.0
)
 
10.0

               Adjusted EBITDA 
$
123.8

 
$
123.3

The following table reconciles net income to Adjusted EBITDA for the periods indicated, and reconciles net income to LTM Adjusted EBITDA-Pro Forma for the last twelve months ended September 30, 2013.
 
(1)
 
(2)
 
(3)
 
 
(In millions)
Nine Months Ended September 30, 2013
 
Nine Months Ended September 30, 2012
 
Year Ended December 31, 2012
 
(1)-(2)+(3)
LTM
Net income
$
57.6

 
$
36.6

 
$
43.4

 
$
64.4

Interest expense, net of capitalized interest and interest income
157.7

 
176.0

 
230.8

 
212.5

Provision for income taxes
26.0

 
14.1

 
21.9

 
33.8

Depreciation and amortization
162.8

 
189.3

 
251.8

 
225.3

EBITDA
404.1

 
416.0

 
547.9

 
536.0

Project opening costs, abandoned projects and development costs (a)
4.8

 
1.9

 
6.3

 
9.2

Gain on early extinguishment of debt (b)
(52.4
)
 
(78.5
)
 
(135.0
)
 
(108.9
)
Impairments of intangible and tangible assets (c)
29.9

 
3.0

 
3.0

 
29.9

Non-cash expense for stock compensation benefits (d)
0.5

 
(0.8
)
 
1.1

 
2.4

Other items (e)
11.5

 
19.6

 
26.2

 
18.1

               Adjusted EBITDA
$
398.4

 
$
361.2

 
$
449.5

 
486.7

Pro Forma adjustment for estimated cost savings yet-to-be-realized (f)
 
 
 
 
 
 
37.0

               LTM Adjusted EBITDA-Pro Forma
 
 
 
 
 
 
$
523.7



26


(a) 
Amounts represent pre-opening costs incurred in connection with new property openings and expansion projects at existing properties, as well as any non-cash write-offs of abandoned development projects.
(b) 
Amounts represent the difference between the fair value of consideration paid and the book value, net of deferred financing costs, of debt retired through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.
(c) 
Amounts represent non-cash charges to impair intangible and tangible assets primarily resulting from changes in the business outlook in light of economic conditions.
(d) 
Amounts represent non-cash stock-based compensation expense related to stock options and restricted stock granted to CERP's employees.
(e) 
Amounts represent add-backs and deductions from EBITDA included in arriving at LTM Adjusted EBITDA-Pro Forma but not separately identified. Such add-backs and deductions include severance and relocation, permit remediation costs, gains and losses from disposals of assets, costs incurred in connection with implementing the Company's efficiency and cost-saving programs, and non-cash equity in earnings of non-consolidated affiliates (net of distributions).
(f) 
Amount represents adjustments to reflect the impact of annualized run-rate cost savings and anticipated future cost savings to be realized from the Company's announced Project Renewal and other profitability improvement and cost-savings programs.



27
 EX-99.2 3 a2013q3ex992preparedremarks.htm EXHIBIT 2013 Q3 Ex 99.2 Prepared Remarks


Exhibit 99.2

Caesars Entertainment Corporation (CZR)
Third Quarter 2013 Earnings Announcement
October 29, 2013

Caesars is posting a copy of these prepared remarks and its press release to its Investor Relations website. These prepared remarks are offered to provide stockholders and analysts with additional time and detail for analyzing our results in advance of our quarterly conference call. As previously scheduled, the conference call will begin today, October 29 at 2:00 p.m. PT (5:00 p.m. ET). To access the live broadcast, please visit the Investor Relations section of Caesars’ website at www.caesars.com. A reconciliation between GAAP and non-GAAP results is provided in the tables in the press release.

Prepared Remarks
Eric Hession:
Good afternoon, and welcome to the Caesars Entertainment third quarter 2013 results conference call. Joining me today are Gary Loveman, Chief Executive Officer, and Donald Colvin, Chief Financial Officer.
Following our prepared remarks, we will turn the call over for your questions. A copy of our press release, today’s prepared remarks and a replay of this conference call will be available in the investor relations section of our website at caesars.com.
Before I turn the call over to Gary, I would like to call your attention to the following information. The Safe Harbor disclaimer in our public documents covers this call and the simultaneous live webcast at caesars.com. The forward looking statements made during this conference call reflect the opinion of management as of the date of this call. There are risks and uncertainties with such statements which are detailed in our filings with the SEC. Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update the information provided today prior to our next quarterly conference call. Further, today we are reporting third quarter 2013 results. These results are not necessarily indicative of results in future periods. Also, please note that prior to this call we furnished a Form 8-K of this afternoon’s press release to the SEC.
Property EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of net income/loss to property EBITDA and net income/loss to adjusted EBITDA can be found in the tables in our press release.

1


This call, the webcast and its replay are the property of Caesars. It is not for rebroadcast or use by any other party without the prior written consent of Caesars. If you do not agree with these terms, please disconnect now. By remaining on the line, you agree to be bound by these terms.
I would now like to turn the call over to our CEO, Gary Loveman.
Gary Loveman:
Thank you Eric, and welcome to today’s call.
Since we were last together three months ago, there has been no shortage of developments at Caesars. Most of these developments involve positive momentum in the execution of our strategy and our efforts to address the company’s capital structure. Before I update you on our progress, I would like to spend a moment talking about two recent pieces of news that you have no doubt read by now.
Ten days ago we announced the withdrawal of our application as a qualifier in Massachusetts. After we received a report from the Gaming Commission’s staff that said we had not demonstrated Caesars’ suitability, our partners in the project asked us to withdraw and we agreed. The staff report raised certain issues, particularly with regard to our trademark licensing agreement with the Gansevoort Hotel Group and an ill-defined association between one of that company’s passive, minority investors and an international crime group, speculated on by the popular press. On top of the fact that this individual has never been charged or convicted of anything, our arrangement with Gansevoort was limited to the use of the company’s brand on the former Bill’s Gamblin’ Hall & Saloon in Las Vegas. The hotel and casino were always going to be operated solely by Caesars. The relationship was scrutinized by our time-tested investigative and compliance process and approved by our independent Compliance Committee, which consists of experienced, accomplished executives and former regulators.
Let me be clear: We have always supported high standards for operators in our business and believe that setting and maintaining these standards is good for the company and the industry. With that said, standards that place unreasonable emphasis on speculative issues despite convincingly thorough, time-tested and independent review and investigation are troubling and, I don’t believe in the long-term best interests of the industry or any particular jurisdiction. Indeed, unlike the practice elsewhere, the Massachusetts process provided no opportunity to address the Gansevoort issue and provide an acceptable resolution. I am obviously disappointed and angry about the outcome, as it is inconsistent with our experience in every jurisdiction in which we have operated for the last 76 years.
We were prepared to clearly and convincingly establish our suitability before the Commission. Following discussions with our partners at Suffolk Downs, who are facing a referendum on November 5, we agreed to withdraw our application as a qualifier at their request. I do want to reiterate that the Commission itself took no action with regard to Caesars’ suitability. While

2


it is too early to determine the resolution regarding our investment in this project, the cash investment is approximately $100 million.
We have reached out to the regulators in other jurisdictions to discuss the Massachusetts report and are encouraged by the tenor of those discussions. We will continue to interact with them to address any questions they may have.
Separately, last week we disclosed that earlier this month we received a letter from FinCEN informing us that it has begun an investigation of Caesars Palace for alleged violations of the Bank Secrecy Act. At the same time, we became aware of an IRS investigation into our anti-money laundering practices. Governmental authorities have been increasingly focused on anti-money laundering in recent years, particularly as it relates to the gaming industry. We are fully cooperating with the authorities in their investigations.
With that, let’s move on to discuss the quarter and our progress against our strategic initiatives. September and October have been extraordinarily active in this regard.
During this period, we:
•
Began offering real-money online poker in Nevada;
•
Completed the rim of the High Roller at the Linq;
•
Went vertical in our construction of Horseshoe Baltimore
•
Announced Britney Spears’ Las Vegas residency and renovation of the Planet Hollywood theatre;
•
Completed the largest gaming re-investment in 10 years;
•
Began driving beams into the ground for the construction of our meetings facility in Atlantic City;
•
And last, but most certainly not least, we completed and advanced several important capital markets transactions as part of our plan to further improve the company’s capital structure and position Caesars for long-term success.
We did all of this against the backdrop of industry conditions that were similar to the first half of the year. In the third quarter, visitation and casino revenues declined across much of our network compared to the year ago period. However, we are encouraged by positive underlying trends in Las Vegas, particularly around the increases we’ve seen in hotel and F&B revenue, which are related directly to our recent hospitality investments in the city.
We are also encouraged by forward-booking activity in the Groups business. The first half of 2014 looks to be in excellent shape with the first quarter shaping up to be the best quarter for this business since the peak in the first quarter of 2008. Several key events, including the return of the Conexpo-Con/Agg show in March are supporting this growth. We estimate that the business will grow by high single digits in 2014.
Prior to discussing the business, I would like to take a moment to review the transactions we completed since our last call.

3


•
In October, we completed the refinancing of outstanding CMBS and Octavius/Linq debt, raising approximately $4.65 billion. These actions address our largest near term maturity, providing runway for new growth opportunities to generate returns for the recovery of the core business.
•
We also completed a public equity offering of more than 10 million shares at the end of September, raising approximately $200 million in proceeds and providing additional liquidity. We also actively worked toward the completion of strategic asset sales during the quarter, which Donald will detail during his financial review.
We are also nearing the completion of our Caesars Acquisition Company rights offering. Apollo and TPG recently funded their investment of approximately $460 million and Growth Partners used $360 million of it to purchase Planet Hollywood, its share of Horseshoe Baltimore, and 50 percent of the management fee for both properties. The rights were distributed on October 21st, and holders of Caesars as of the record date have until November 2nd to elect to exercise their right to acquire shares in Caesars Acquisition Company. The rights offering is anticipated to close on November 18th, and we have applied to list shares on NASDAQ.
The transaction benefits Caesars in many ways, including:
•
The creation of a more flexible vehicle to fund growth projects;
•
A cash infusion to Caesars Entertainment; and
•
Continued participation in the future upside of assets transferred to Growth Partners and future growth investments through a majority economic stake in Growth Partners. In addition to our non-voting stake, Caesars will have the opportunity to exercise a call option to repurchase Growth Partners after three years.
All of these activities taken together, demonstrate the considerable efforts underway to enhance our capital structure and - combined with the investments in our business - create equity value.
Now, turning to specific developments in the execution of our strategy to:
•
Reinvigorate and expand our core markets, particularly Las Vegas, with a focus on hospitality;
•
Expand our distribution network through our in-place domestic development pipeline and social and mobile games business; and
•
Pursue real money online gaming.
With respect to enhancing our hospitality assets in Las Vegas, we are investing significantly to bring new experiences to the city and enhance our current footprint.
These efforts are anchored by The Linq, where we will begin opening the retail, dining and entertainment offerings in phases beginning in December, with the opening of the High Roller being the last stage in 2Q 2014.
If you have visited Las Vegas recently, you will have no doubt observed that the rim of the High Roller has been completely assembled and taken its place on the skyline of the Strip. We will begin attaching the cabins to the wheel next month, and plan to

4


begin operating the High Roller in the second quarter of next year. We also anticipate our properties surrounding the Linq, many of which are currently being updated or renovated, to benefit significantly from incremental visitation, enhanced ADRs and higher casino foot traffic.
We also made a major enhancement to our entertainment offerings with the announcement that Britney Spears will start a two-year residency at Planet Hollywood. Our artist in residence program is very successful and associates us with some of the biggest names in entertainment, including Celine Dion, Elton John and Shania Twain. I would also note that the Planet Hollywood venue will be one of the first venues to combine a typical theatre with a nightlife experience.
At Bill’s, construction is moving along well and the building is beginning to show its final exterior finishes. As I mentioned earlier, we terminated our licensing agreement with the Gansevoort Group and are evaluating alternatives for a new name for Bill’s. Plans for the development are otherwise unchanged. Interior framing is nearing completion and drywall installation will begin soon. We expect to open the hotel and casino as well as Drai’s dayclub/nightclub and pool in the first half of 2014. We anticipate this property will generate significantly higher ADRs than it did as Bill’s. At the Nobu Hotel, our other boutique offering in Las Vegas, ADRs have increased by more than 65% from when it operated as the Centurion Tower.
At Bally’s, the renovation of the 756-room South Tower, which we have rebranded the Jubilee Tower, is nearly complete. Approximately 95% of the tower has been refreshed with the remaining rooms to be completed in November. The response and feedback from guests has been positive as evidenced by the strong service scores received to date. We are already seeing a $45 ADR cash premium on these rooms relative to other Bally’s rooms, which is worth $10 million on an annualized basis.
At the Quad, we completely refurbished the casino floor, which reopened in September - excluding the sports book which will open in mid-November and the lobby bar which we are currently redesigning. The Quad now benefits from a much-improved arrival experience, new gaming floors with upgraded surroundings and expanded guest check-in facilities that will reduce wait times. With access to the casino floor from both the Strip and the Linq, we believe the Quad will benefit significantly from pedestrian traffic. As I have described on prior calls, the construction related to these investments on the Strip have created significant disruption within the core of our Las Vegas footprint for more than a year. We expect some of this disruption to continue during the near team but are optimistic it will abate by the middle of next year.
In addition to our hospitality investments, we completed a major investment in our gaming assets with the purchase of 7,000 video poker terminals from IGT. This is the largest gaming re-investment Caesars has made in 10 years. Upgrading our gaming assets aligns with our objective to deliver superior guest experiences at our properties across the country by providing modern, state-of-the-art gaming units.

5


Turning to our domestic expansion initiatives -
As I mentioned earlier, construction is underway in Baltimore, where we are “out of the ground” and on track to open in Q3 2014. We are very excited about this opportunity to open another urban casino in a prime location with strong regional Total Rewards membership.
In Atlantic City, construction of what will be the largest meeting and conference center in the Northeast is well underway. We believe our state-of-the-art facility will attract new segments of visitation to the market, particularly mid-week, and absorb excess hotel room and restaurant capacity. We see this as an opportunity to capture a share of the $16 billion convention and meeting market in the Northeast and anticipate the meeting center will open in 2015. We’ve already booked a couple large groups for the facility and look forward to further leveraging our nationwide sales organization. Customer feedback has been positive around having a viable conference center alternative in the Northeast.
Real money online gaming is another important component of our plans to expand our distribution network. We launched real money online poker in Nevada on September 19. Though we are only about six weeks in, we have received positive feedback from players on WSOP.com about how sophisticated, user-friendly and dynamic the game play is. We commenced our marketing efforts at the end of September, utilizing a combination of promotions and advertisements that complement our land based strategy. For example, earlier this month we awarded prizes into our land based World Series of Poker Europe tournament in Paris, where one lucky Nevadan was offered a chance to win a package to play in France. Because of the popularity of the World Series of Poker franchise and our physical footprint, Caesars and CIE are uniquely positioned to tie in offline and online opportunities to broaden our reach.
In New Jersey, we expect to launch online gaming by November 26th with soft play starting on November 21st, subject to regulatory approvals. We believe the successful launch of real money online gaming in these states could serve as a model and potentially stimulate other states considering online gaming legalization.
In social and mobile games, we maintained our position as the world’s leading provider of social casino games. Our social/mobile platform is a key differentiator for our company and a meaningful revenue driver. During the quarter, Playtika released Caesars Slots on iOS and Google Play stores.
We are constantly improving upon and investing in our marketing, loyalty and analytics capabilities and programs. These are at the core of our company and are critical to optimizing the impact of our integrated network.
Our recent investments in big data have enhanced our understanding of the non-gaming behavior of our guests and how much amenities such as hotel, food and beverage and entertainment drive engagement. We are already benefiting from these insights, and over time, we believe this insight will further enrich our loyalty program by enabling us to more effectively market to our customers and stimulate non-gaming behavior.

6


This year, we have also emphasized promotions and generating excitement at our properties to encourage visitation. The Millionaire Maker promotion offers players innovative and entertaining ways to become the next instant millionaire. We have created around 40 millionaires this year and 745 to date. We have been very pleased with the results associated with the new Caesars.com, which include increases in direct bookings and cross promotion. We also launched our new mobile platform at the end of September, which enables us to better engage guests before, during and after their visits. We have optimized the entire booking flow for mobile devices, including up-selling, cross-selling, packaging, amenity sales and promotions.
As a result of these efforts, we have been recognized by third parties for our innovative, industry-leading marketing and loyalty programs. We ranked No. 11 in InformationWeek’s annual list of the nation’s Top 500 most innovative users of technology, which is up from No. 230 in 2012. The primary reason for our impressive positioning this year was the redesign of Caesars.com. We were also recognized with Colloquy’s Master of Enterprise Loyalty Award for the second consecutive year, the only company to achieve this distinction twice. This recognition can be attributed to the improved connection between our loyalty and VIP programs, our ability to activate the experience through our hosts and our use of digital to create new loyalty program fueled touch points with members.
The last few weeks have certainly been eventful, but the most important news has been positive as we work to improve our capital structure and add exciting new offerings to our network.
With that, I will turn the call over to Donald for additional commentary on our financial performance and balance sheet.
Donald Colvin:
Thank you Gary.
As Gary mentioned, we made significant progress over the past several months towards our goal of improving our balance sheet and overall capital structure. Through a combination of debt re-financings, an equity issuance and a strategic asset sale, the company is better equipped financially to execute on the strategy that Gary outlined and which we are actively pursuing.
Breaking down the transactions in greater detail -
•
On October 11th, we completed the $4.65 billion Caesars Entertainment Resort Properties or CERP refinancing transaction, comprised of a $2.5 billion credit facility, $1 billion of first lien notes, and $1.15 billion of second lien notes. We also have an undrawn revolver totaling $269.5 million. The proceeds fully repaid the outstanding Caesars CMBS facility and also refinanced the Octavius/Linq Senior Secured Loan. As a result of the refinancing effort, we captured approximately $100 million in discounted repurchases and reduced total borrowings by approximately $200 million. Given that the transaction closed after quarter end, the results reported today do not reflect the impact of this refinancing. In today’s earnings release, we did provide some CERP financial information as if the transaction had been completed

7


on September 30th rather than on October 11th. As a result, Octavius/Linq is accounted for in both CEOC and CERP financials this quarter.
•
On September 25th, we raised approximately $200 million in cash via a public equity offering. We issued 10.34 million shares, including the over-allotment, at a net price of $19.40 per share to Caesars. The shares were issued via the $500 million shelf registration statement that has been in place since shortly after the IPO in February 2012. This recent issuance is in addition to approximately $15 million we have issued via the company’s at-the-market program from the start of the program through Q3. The offering closed October 1, 2013.
•
In August of Q3, we entered into a share purchase agreement with Pearl Dynasty for our Macau Golf Course and are on track to close in Q4 13. Net proceeds from the sale are expected to be ~$420 million, with which we plan to fund CEOC capital expenditures or to repurchase CEOC debt.
•
Also during the third quarter, we completed the financing of the Horseshoe Baltimore property which includes a $225 million senior secured term facility, two delayed draws of $37.5 million, a $30 million FF&E facility, and a $10 million revolver.
•
And lastly, as Gary mentioned, we completed the creation of Caesars Growth Partners and Caesars Acquisition Company. Going forward, we will consolidate Caesars Growth Partners as part of Caesars Entertainment’s financial statements. In addition, Caesars Acquisition Company will submit its quarterly and annual filings as required by the SEC.
In sum, it has been a very successful several months from a transaction perspective.
Turning to our third-quarter results. Performance was driven by similar factors as the first half of the year, including continued softness in the domestic gaming market and competition. We reported third quarter net revenue of $2.2 billion, relatively flat from the year-earlier period. A 7.1% decline in casino revenue was largely offset by increases in room revenue from the implementation of resort fees, higher reimbursable costs from our managed properties as well as lower promotional allowances. Gaming revenue reflects continued slot volume weakness in virtually all our domestic markets, while table volumes were relatively strong. Cash average daily room rates increased from $89 in the third quarter 2012 to $101 in the current quarter, primarily attributable to resort fees in Las Vegas and other Nevada properties. We report cash ADRs as total ADR is subject to transfer pricing assumptions between the casino and hotel and we believe it to be a less effective metric for reporting hotel performance.
Loss from operations for the third quarter 2013 was $637.5 million compared to $216.8 million in the prior year quarter primarily due to higher non-cash intangible and tangible asset impairment charges. Similar to net revenue, property EBITDA was also relatively flat from the year-ago period. The income impact from lower gaming revenue was almost completely offset by lower operating expenses driven in part by effective cost reduction programs as well as the benefit from resort fees and favorable hold. The year-ago quarter Property EBITDA also benefitted from ~$5 million of EBITDA from Harrah’s St. Louis which was

8


sold in Q4 2012. Conrad Punta del Este, which was sold in May 2013, generated an approximate negative $3 million in Property EBITDA in Q3 2012. Adjusted EBITDA increased 4.9% to $508 million.
Overall, the company’s EBITDA benefitted from $15 million of favorable Q3 hold year-over year, primarily at Caesars Palace. $30 million of favorable hold in Las Vegas was partially offset by $10 million of unfavorable hold in Atlantic City and $5 million of unfavorable hold in Other U.S. Regions.
Now, let’s take a look at our balance sheet and liquidity. Caesars had $1.8 billion in liquidity at quarter-end. This included $1.7 billion of cash not including restricted cash, $215 million of revolver capacity, less $100 million of the revolver capacity committed to letters of credit. Debt, net of cash, was $22.1 billion, excluding restricted cash.
The $23.8 billion total face value of debt at quarter-end included $225 million of Horseshoe Baltimore Term Loan B that closed on July 2, 2013. The total debt number does not include the $4.65 billion of debt associated with the CERP refinancing which closed in the fourth quarter. Total face value of debt repurchased during the quarter was around $71 million, and we repurchased $50 million of CMBS and $18 million of the CEOC 5 3/8ths unsecured notes due 2013. Post Q3, we reduced total borrowings by approximately $200 million as a result of the CERP refinancing.
Total cash was $1.7 billion, not including restricted cash. Included in our cash balance is $50 million received to date in cash proceeds from the sale of Conrad Punta del Este and $66 million of the anticipated $420 million in cash proceeds from the sale of the golf course in Macau. We expect to receive both the remaining $32 million of cash from Punta del Este and $354 million in cash proceeds from the sale of the Macau Golf Course in Q4 2013. Also not included in the third quarter cash balance are the $200 million of proceeds from the equity offering that we closed in October as well as proceeds from CGP. CEOC and legacy CMBS cash balances were $1.3 billion and $117 million, respectively at September 30, 2013. Cash at the parent was $223 million, and CERP cash balance was $127 million for Q3.
Restricted cash was $527 million, and includes project funds that have been raised but not spent on The Linq and the renovation of Bill’s as well as reserve funds for the legacy CMBS properties and Planet Hollywood. The September 30th restricted cash balance was ~$193 million higher compared to the $334 million balance on June 30th, driven in large part by ~$219 million of Baltimore proceeds which are in restricted cash, offset by spending on The Linq and Bill’s. The intercompany loan from CEC to CEOC was $285.4 million, no change to the balance at the end of June.
Capital expenditures during the third quarter were around $150 million. We spent around $140 million in CEOC, primarily on The Linq, Baltimore and Bill’s, and around $10 million in our legacy CMBS properties, mainly on Linq-related upgrades at the Flamingo. Total capex spent during the quarter on the Linq/Octavius was around $40M.
We are lowering our capex expectations for 2013, primarily due to timing shifts of projects. Our expectations for planned capital expenditures for full year 2013 are $650 to $750 million. We anticipate:

9


•
Approximately $390 million to be allocated to project-related CapEx and approximately $330 million to maintenance CapEx. Included in the $390 million of project-related CapEx is approximately $150 million of project financing associated with The Linq, Bill’s, Baltimore, and other development projects that we have previously financed, plus approximately $240 million of our equity. Included in the $330 million of maintenance CapEx is spending on room upgrades and facilities, especially in Las Vegas.
•
We plan to spend approximately $420 million in CEOC and approximately $290 million in CERP, with the remainder to be spent primarily in CEC due to the Atlantic City Meeting Facility. The $420 million of CEOC capex does not include 12 months of estimated Linq/Octavius capex but does include Horseshoe Baltimore and Planet Hollywood capex. The $290 million of CERP capex includes twelve months of estimated capex spend on Linq/Octavius and legacy CMBS.
Going forward, we remain focused on driving efficiency, tightening cost control, and further improving our balance sheet. We are actively pursuing improvements to our working capital and cash flow via a series of initiatives which span the entire organization. Initiatives include improving our inventory receivables and optimizing our cash balances. They also include pursuing additional cost optimization initiatives including more efficient workplace scheduling and incremental selling opportunities. These initiatives are driving improved financial performance as we exit 2013 and create a more financially disciplined company for 2014 and beyond, with any sustained economic recovery to provide an additional tailwind.
With that, I will hand it back to Gary for his final remarks.
Gary Loveman:
Thank you, Donald.
2014 promises to be a very exciting year for Caesars, as we introduce new developments in Las Vegas, Baltimore and on-line. Our new entities and steady attention to our capital structure creates the foundation for further growth and enhancements to our network.
We are now happy to take your questions.


10


Safe Harbor Statement
These prepared remarks includes "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as "may," "will," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "continue," "pursue," or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies, and future financial results of Caesars, as well as statements relating to forward-booking activity of our Groups business, our properties surrounding the Linq benefiting significantly from incremental visitation, enhanced ADRs and higher casino foot traffic, the launching of online poker in New Jersey, and the closing of the CAC rights offering and the listing of the CAC shares on NASDAQ. These forward-looking statements are based on current expectations and projections about future events.
Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of Caesars may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein):
•
the impact of the Company's substantial indebtedness and the restrictions in the Company's debt agreements;
•
access to available and reasonable financing on a timely basis, including the ability of the Company to refinance its indebtedness on acceptable terms;
•
the effects of local and national economic, credit, and capital market conditions on the economy, in general, and on the gaming industry, in particular;
•
the ability to realize the expense reductions from cost savings programs;
•
changes in the extensive governmental regulations to which the Company and its stockholders are subject, and changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines, and fines of courts, regulators, and governmental bodies;
•
the ability of the Company's customer-tracking, customer loyalty, and yield-management programs to continue to increase customer loyalty and same-store or hotel sales;
•
the effects of competition, including locations of competitors and operating and market competition;
•
the ability to recoup costs of capital investments through higher revenues;
•
abnormal gaming holds ("gaming hold" is the amount of money that is retained by the casino from wagers by customers);
•
the ability to timely and cost-effectively integrate companies that the Company acquires into its operations;
•
the potential difficulties in employee retention and recruitment as a result of the Company's substantial indebtedness or any other factor;
•
construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;
•
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;
•
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, including losses in revenues and damage to property, and the impact of severe weather conditions on the Company's ability to attract customers to certain of its facilities, such as the amount of losses and disruption to the Company as a result of Hurricane Sandy in late October 2012;
•
the effects of environmental and structural building conditions relating to the Company's properties;
•
access to insurance on reasonable terms for the Company's assets; and
•
the impact, if any, of unfunded pension benefits under multi-employer pension plans.

Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Caesars disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of these prepared remarks.


11
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